A VAT voucher system for origin-based taxation and destination-based revenue distribution within federations and economic unions without internal fiscal borders by Howell H. Zee (11/2011).
A major challenge in value-added tax (VAT) design concerns the discovery of an approach to ensure that, in a decentralized system of VATs being administered by individual jurisdictions within a federation or an economic union, VAT revenue collection would be distributed among the jurisdictions on the destination basis even in the absence of internal fiscal borders. This paper contains a new proposal, in the form of a specially-designed voucher system coupled with the coordinated use of reverse charges, to overcome the above challenge in an incentive-compatible and cost-effective manner, and argues that it has significant advantages over all other currently known proposals or practices. The policy implications of this proposal are considerable, not only for those authorities (such as the European Union) who are currently engaged in an on-going search for a satisfactory solution to this long-standing VAT challenge, but also for other authorities (such as the United States) who may well face the same challenge in the future.
